Nokia Buys Navteq For $8 Billion, Bets Big On Location-Based Services

[qi:012] Nokia (NOK), the Finnish mobile phone giant with nearly a third of the global handset market, has decided to bet big on location-based services (LBS), and is buying Chicago-based digital map company NAVTEQ (NVT) for $8.1 billion. That works out to about $78 a share. This is one of Nokia’s largest purchases to date — the Finnish mobile giant has a mixed track record when it comes to acquisitions.

This is also the second megabillion dollar buyout in the maps (LBS) space. Earlier this year, Dutch GPS device maker TomTom bought Tele Atlas for $2.8 billion.

Nokia is paying 32 times EBITDA while TomTom paid around 27 times EBITDA. Since the deal for Tele Atlas hasn’t closed, TomTom might have to pay a little more. The deal may have some negative ramifications for guys like Garmin, a NAVTEQ customer, but it is too early to say what Nokia’s strategy will be. Nokia had also released Nokia 330, a GPS-based navigation device targeting the European market, and so could find itself competing with Garmin.

“Location-based services are one of the cornerstones of Nokia’s Internet services strategy,” said Olli-Pekka Kallasvuo, Nokai’s president and CEO. “By joining forces with NAVTEQ, we will be able to bring context and geographical information to a number of our Internet services with accelerated time to market.”

According to iSuppli, there will be 250 million GPS-enabled phones shipping per annum by 2010. According to some estimates, the number of mobile users accessing maps and related information on their mobile phones is going to grow to about 43 million in 2012 from 4 million in 2007.

Maps on Mobile is apparently something people want. In a recent chat, Google (GOOG) vice president Marissa Mayer told us that Google Maps usage soared after the introduction of the iPhone.